Chapter 5 Employer-Sponsoned Healsh Inssenance Programs 169 its health insurance

Question

Chapter 5 Employer-Sponsoned Healsh Inssenance Programs 169 its health insurance in particular. With a few months to go before the com enrollment period for benefits, Nigel is starting to think that giving employees more 0trol in their health decisions may just be the path to lowering health care insurance costs. s Nigel examines reports on employee claims under the current health insurance estions whether employees are making the right choices for their health care. lan, r example, there has been a spike in the number of emergency room claims over the last This concerns Nigel, as the cost of expensive emergency room visits impact Classics ear. room visits may be made out of convenience instead of only a slightly higher copayment to use chitects' overall health insurance premium costs. Nigel suspects that these emergency the emergency room instead of a doctor's office em it. Thus, employees may be using the emergency room immediately instead of waiting vis to schedule appointments with immed Achitects' health care costs their own doctors, even if their illnesses do not requir iate care. This is just one example of employee behavior that is driving up Classic Nigel believes that it might be best to take a consumer-driven health care approach g a health insurance plan with higher deductibles, which will lower the cost of r the company. As employees will bear more of the cost of their own health care, Nigel believes they will make better health care choices. To make this shift, Nigel is g the use of a flexible spending account (FSA) to a health savings account (HSA) lp employees manage the increased costs by setting aside funds on a pretax basis to by selectin premiums fo pay for medical expenses, such as the deductibles. to determine if an FSA or an HSA will help control costs more at Classic Architects. An FSA would allow employees to set aside pretax earnings to pay for medical penses not covered by insurance. The FSA would be paired with a health insurance plan that has a higher deductible than the company's current plan. However, Nigel thinks that adding the HSA might have a more significant impact on the company's health care costs. The HSA would be coupled with a high deductible health insurance plan, which would cost a significantly less amount to the company than the plan offered with the FSA. The company would allow the employees to set aside pretax earnings to spend on medical similar to the FSA, but the expenses would be higher for the employees due to the high deductible. Thus, the HSA would permit the company to contribute to the account as well. With each of these options, employees would be more aware of the costs of their Nigel wants ex expenses, health care and should make better health care choices. As Nigel reviews the utilization reports and the premiums that the company is paying for health insurance, he thinks that moving to a more consumer-driven approach is likel a good idea for the company. However, he is also concerned with employee acceptance of such a change. Before making his final recommendation, he knows that he needs to thor- oughly explore the pros and cons of each option 1. What are some overall advantages and disadvantages of pursuing consumer-driven health care options? 2. Should Classic Architects select a flexible spending account or a health savings account?

Explanation / Answer

onsumer-Driven Health Plans (CDHP) with health savings accounts (HSAs) provide you with a vehicle to put away money, tax-free, for your health care. And it is always yours.

b) Second, these plans are coupled with a tax-favored “personal savings account”.

b) Any earnings on the money in your HSA grows on a tax-free basis.

c) The money is not taxed when used to pay medical expenses. The IRS annually determines the amounts that individuals can contribute to an HSA for individual or family coverage. Your plan will tell you what those limits are, what your deductibles are and what your total out-of-pocket maximums can be.

b) Diagnostic services and prescriptions.

c) Other medical expenses covered by your plan.*

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